Don't face the Internal Revenue Service by yourself! Gary Bloome, Certified Public Accountant, can negotiate with the IRS on your behalf! I may be able to get you into a Currently Not Collectible (CNC) status, postponing collection efforts from the IRS. I may be able to negotiate an installment agreement, spreading your IRS debt for up to 72 months. And I may be able to negotiate a Offer In Compromise, significantly reducing your IRS debt to a level that makes it possible for you to permanently eliminate the debt by making monthly payments within your budget.Call me today to see how to start the process!

As the year came to a close, talking heads in America were focused on the Fiscal Cliff and how it would affect individual taxpayers. Many provisions were set to expire. Others had expired and were possibly in play for reinstatement. New taxes were set to be enacted and other tax provisions were expiring in the future. Below is a summary of those provisions and how they were changed by the American Tax Relief Act of 2012 legislation passed on New Year’s Day. 1. Lower tax brackets and Marriage Penalty Relief - The lower brackets were maintained at present levels except for taxpayers with $450K in taxable income for Married Filing Jointly, $400K for others. Those in excess will be taxed at 39.6% on the excess of those levels. 2. Payroll tax reduction - The 2% reduction in social security tax expired and was not extended. Social security rate reverts to 6.2%.3. Capital gain rates - Lower capital gain rates of 0% and 15% remain in place for taxpayers under the income rates mentioned above. For those in excess of these rates, the capital gain rate goes to 20%. 4. 3.8% Medicare tax. Certain investment income, including capital gain, is now subject to a 3.8% Medicare tax for taxpayers with income exceeding $200K, $250K married filing jointly. For taxpayers with rental income and income exceeding these levels, this 3.8% Medicare tax will apply to this investment income. These provisions became law in 2013.5. Estate, Gift and GST Tax - The estate tax exclusion that was due to revert to $1 million was permanently extended to $5 million, indexed for inflation, making the 2013 exclusion $5.25 million. The tax rate was increased from a top rate of 35% to 40%. 6. Sales Tax Deduction - The ability to choose between state income tax and sales tax as an itemized deduction expired at the end of 2011 but has been extended for 2012 and 2013. 7. Liberalized Child and Dependent Care Rules - This credit was scheduled to be reduced to $2400 per qualifying child, up to 2 children and top percentage reduced to 30%. The 2011 limits of $3000 per qualifying child and 35% of qualifying expenses were reinstated permanently.8. Child Tax Credit and refundability - Due to be reduced to $500 and no refundable element, the $1000 credit was extended thru 2017 and will continue to be refundable if the taxpayer qualifies.9. American Opportunity Credit - Due to expire in 2012, was extended for 5 years thru 2017.10. Mortgage Insurance Premiums - The ability to deduct mortgage insurance premiums as home mortgage interest was due to expire after 2011. It was extended for 2012 and 2013.11. Phase out of deductions and exemptions - Beginning in 2013, the phase of personal exemptions and itemized deductions will be reinstated for single taxpayers with income over $250K, $300K for married filing jointly. The itemized deductions can be reduced by 80% at 3% of income over the limits. The exemptions are reduced by 2% for every $2500 over the income levels and can be fully eliminated when income exceeds the phase out point by $122,500.12. Exclusion of principal residence cancellation of debt income - This exclusion was due to expire in 2011 but has been extended for 2012 and 2013.13. Student loan interest deduction, previously a temporary provision, was made a permanent deduction.14. AMT - The limits were permanently raised to $78,500 married filing jointly and $50,600 for single. These limits will be indexed for inflation.15. Adoption Credit was made permanent but is no longer a refundable credit. 16. Non-business energy credit due to expire in 2011 was extended for 2012 and 2013.17. Educator Deduction - The $250 deduction for educators was extended for 2012 and 2013. 18. Tuition and fees deduction - The above-the-line adjustment of up to $4000 of qualified education expenses was due to expire after 2011 tax year. It was extended for 2012 and 2013.Although many provisions were extended permanently, many will be back in play after the 2013 tax filing season. Taxpayers and tax preparers should continue to monitor the lawmakers to try to stay ahead of the changes that are bound to occur.Need tax advice? Please call me and we can set up a time to discuss your personal or business tax situation.Gary BloomeCertified Public AccountantOffice (561)477-8099Cell (561)302-23739148 Glades RoadBoca Raton, FL 33434www.Garybloomecpa.comGbloome@prodigy.net

An Opportunity to Recoup Some of the Expenses of Higher Education

The current tax code encourages individuals to seek higher education for themselves and their dependents. For the tax year ending December 31, 2012, taxpayers will again have the choice of two possible education credits-The American Opportunity Credit and the Lifetime Learning Credit. In order to take the credit on their returns, taxpayers must complete Form 8863. Each credit has different requirements and benefits.

American Opportunity CreditOf the two credits, the American Opportunity Credit provides the most benefits. It also is the most restrictive in its requirements. The American Opportunity Credit is only available for the first 4 years of post-secondary education and is only available for 4 years. The student must be enrolled at least half time in one semester during the tax year and be pursuing a degree or recognized education credential. The student cannot have been convicted of a felony for drug possession or distribution. There is also an income limitation that starts to phase out at $160,000 and eliminated at $180,000 of modified adjusted gross income(MAGI) for married filing jointly or starting at $80,000 and eliminated at $90,000 for single, head-of-household or qualifying widow(er).

Assuming the student meets these requirements, the credit amount is limited to $2500 per qualifying student. The credit amount is 100% of the first $2000 in qualifying expenses and 25% of the next $2000. The credit is 60% non-refundable, meaning this portion can only reduce the income tax to 0. The refundable portion of 40% can result in a refund to the taxpayer.Qualifying expenses include tuition, fees and required materials and equipment. These materials do not need to be purchased from the educational institution as a requirement of enrollment.Lifetime Learning CreditThe Lifetime Learning Credit, as the name implies, has no restrictions on the years available. There is no requirement to be degree-seeking or minimum enrollment percentage. Drug felonies do not disqualify the student. The income limitations are stricter than the American Opportunity Credit, with a limit of MAGI phasing out at $104,000 and eliminated at $122,000 for married filing jointly. For single, head-of-household and qualifying widow(er), the credit starts phasing out at $52,000 and is eliminated at $62,000.

The credit amount is $2000 per tax return and is non-refundable. Qualifying expenses include tuition, required fees and expenses if paid directly to the institution as a condition of employment. The credit is for 20% of the qualifying expenses up to $10,000.

Both credits are unavailable if the taxpayer is married filing separately. They cannot claim the credit if they are claimed as a dependent on another’s return. Non-resident aliens are not eligible for the credit.

If you had education expenses in prior years and may have overlooked these credits or did not take full advantage of the credit, please call our office today to schedule a time to amend your returns.

A typical human behavior is to avoid assistance. Most people like to be considered completely independent and only ask for help when there seems to be no alternative. This attitude is especially prevalent when it comes to finance. Both personal and business finances may benefit greatly by taking the steps to get the needed financial guidance and assistance.PERSONALIn personal finance, any number of life occurrences can contribute to the need for money management assistance. Illness, divorce, death of a spouse, work pressures - all can throw one's life out of balance and cause financial chaos. It can appear overwhelming. Many times an individual will rely upon friends and family to help. This may be a short-term solution for a long-term situation. Friends and family members may not be qualified to adequately address the issues. They may also not be willing to take on the responsibility for a significant length of time. Professional financial management may seem too costly but this conception may be inaccurate.Personal daily money management service is a rapidly growing service industry. Their services vary with the individual needs and the service provider's capabilities and range from simple financial advice and planning, to taking over the finances completely. Bill paying, opening the mail, reconciling bank and brokerage accounts, insurance and medical claim analysis, tax return preparation, planning and budgeting are just a few of the services that daily money managers perform.BUSINESSIn business, the money management function may be performed by the business owner or an in-house bookkeeper. Many times, the only professional accounting involvement is the annual tax return preparation. Businesses could benefit greatly by having regular professional assistance and these benefits may greatly exceed the cost.The business owner's time may be better spent managing the functions of the business. Having a bookkeeper on staff can be expensive and many small businesses cannot justify the cost. Also, the business owner and the bookkeeper may not have the financial background of a professionally trained certified public accountant and money manager. OUR SERVICESGary Bloome PA is a certified public accounting firm. With over 20 years of experience, all work is performed and reviewed by a certified public accountant (CPA). Gary Bloome is a certified public accountant, a certified forensic accountant and a certified Quickbooks ProAdvisor. With monthly rates as low as $100, the services are affordable by individuals and small businesses. Call our office at (561) 477-8099, visit our website at www.GaryBloomeCPA.com or our Daily Money Management page, or email Gary at garybloome@garybloomecpa.com for more information.

Have you ever thought about all the taxes you have to pay? Some are obvious. You can see that you pay sales tax every time you go to a retail store. You look at your paystub and see your federal and state income, social security and medicare taxes. If you own a home, you see your property taxes once a year or every time you pay your mortgage payment if you escrow your taxes.

Others are not so obvious. When you fill up your gas tank, a portion of the per gallon price is federal, tax and local tax. Your cell phone has state and federal taxes. And your cable bill, electric bill, natural gas bill are all taxed. So called sin taxes on cigarettes and alcohol are part of your tax burden if you purchase these products. Hotels and resorts have various state and local taxes. How can you measure all the taxes you pay?The AICPA has come out with a tax estimator website. Total Tax Insights at www.totaltaxinsights.org provides a tool that uses more than 20 different taxes to provide some insight into your tax burden. It may surprise you and can be quite useful. The website may offer some guidance if you are considering relocating by comparing the total taxes of your current location and a possible new location. It could change your shopping habits or driving habits by quantifying specific taxes.

Knowledge is a powerful tool and if you need some guidance in handling your finances and taxes, please call me to set up a free initial consultation.

Business owners are faced with many challenges. How can I reduce my taxes? How can I get and keep quality employees? How can I save for retirement? The answer to these questions may involve the right retirement plan for your business.

What Are the Options?Retirement plans have been around for decades but in recent years, the traditional pensions of the past are not as common. Today’s retirement plans are usually one of the IRA-Based plans, a defined contribution plan or the more traditional defined benefit plan.

PD IRAs and SEPs are easy to set up and maintain and any employer with one or more employees can be eligible. For PD IRAs, the contributions are made by employees and are limited to the annual IRA limitation ($5000 for 2012). PD IRAs allow employees to make their IRA contributions through payroll deduction but do not provide the employer with any tax benefits.

SEPS are funded solely by the employer contributions. The limit is 25% of compensation, limited to $50,000 for 2012. It must be offered to all employees who are at 21 years old and employed for 3 of the last 5 years. An SEP plan for a self-employed business owner may be an ideal vehicle to defer income.SIMPLE IRAs include employee contributions and require employer matching. Employees can contribute up to $11,500 (plus $2500 if 50 years old or older) per year. The employer must either match 100% of the first 3% of compensation or 2% of each eligible employee’s compensation. These plans are limited to employers with 100 or fewer employees. Although the SIMPLE plan can be expensive, it may be an excellent incentive for employees.Defined Contribution PlansSafe Harbor 401(k), Automatic Enrollment 401(k), Traditional 401(k) and Profit Sharing are considered defined contribution plans. All plans are open to any employer with one or more employees and the plans vary in their complexity. Generally, the plans must be offered to all employees who are at least 21 years old and worked 1000 hours in the prior year.For 2012, all 401(k) Plans allow employees to contribute up to $17000 per year and employees 50 years or older can contribute an additional $5500 per year. The total employer/employee combined contributions is the lesser of 100% of compensation or $50,000.Safe harbor plans are designed to promote participation among all employees and do not require annual discrimination testing. This is an advantage for highly compensated employees, allowing them to contribute more than they would in a traditional plan. The downside to the employers is that all mandatory employer contributions are 100% vested. Automatic enrollment plans enroll all employees unless they opt out of the plan. The contribution rates are set so the plans typically meet discrimination testing. These plans are suited for employers looking for high participation rates.Traditional plans are subject to annual discrimination testing. Employee contributions are vested immediately but the employer matching contributions typically are vested according to the plan vesting schedule. The vesting encourages employee retention.Profit sharing plans are funded by discretionary employer contributions. These plans allow employers to make large contributions for employees but the amounts are not pre-determined. Defined Benefit PlansDefined benefit plans are fixed pre-established benefits. Employers are usually required to make the contributions by the plan documents. These plans are available to any employer with one or more employee. These plans are not subject to the limitations of defined contribution plans and many employees value these plans because of a potential for greater benefits at retirement. These plans are more complex and more expensive to establish than other plans.

If you are interested in seeing how various retirement plans can assist you in reaching your business and personal financial goals, please contact Gary Bloome, PA. Gary Bloome PA9148 Glades RoadBoca Raton, FL 33434garybloome@garybloomecpa.comOffice: (561)477-8099Cell: (561)302-2373

One of the first decisions all new businesses have to make is what entity structure should they have. From sole proprietorships to corporations, each business entity has advantages and disadvantages. The three main types of entities are sole proprietorships, partnerships and corporations. Partnerships can be general partnerships, limited partnerships, limited liability partnerships and limited liability companies. Corporations can either be corporations or S Corporations.SOLE PROPRIETORSHIP

There are no formal requirements for a sole proprietorship. It doesn’t require an employer identification number (EIN) unless the entity has employees. The owner can sell the business or its assets as desired, convert to another entity or dissolve at the owner’s whim.On the negative side, the owner’s personal assets are subject to the entity’s liabilities and legal claims. The entity is limited to one individual. All income is reported on the individual’s income tax return and is subject to self-employment tax. PARTNERSHIPSGeneral partnerships do not require formal formation procedures besides a partnership agreement. The entity should file for an EIN and file a partnership return, allocating income and expenses to the partners. A general partnership is similar to a sole proprietorship except it involves two or more partners.

Limited partnerships are similar to general partnerships except one or more of the partners is considered a limited partner and is considered a separate legal entity. Limited partnerships must file a certificate with the Secretary of State of the state of formation. Limited partners are not liable for the debts and obligations of the partnership as long as they do not become too actively involved in the management of the partnership.

Limited liability partnerships(LLP) are also separate legal entities. LLPs must file with the state and although the rules vary by state, usually required insurance to cover the liabilities of the partnership. Also, many states restrict the entity to professionals, such as attorneys, accountants and other similar disciplines. Limited liability companies(LLC) are not by definition partnerships but are treated as partnerships for federal tax purposes. It is considered a separate legal entity and requires filing at the state level. There are few restrictions on the type of business and the type of entities who can be members. Members have limited liability even though are actively participating in the business.CORPORATIONSCorporations are separate legal entities from the shareholders. Generally, the same formalities are required whether the shares of the corporation are trader on the New York Stock Exchange or held by a single shareholder. Management is usually done by a board of directors elected by the shareholders. The organization has an unlimited life and requires a formal election to dissolve the organization. The profits of a corporation are taxed at the entity level and any dividends are also taxed when received by the shareholders.S Corporations are similar to so called C Corporations except there are restrictions on how many and what type of organizations can be shareholder. Also, the earnings are not taxed at the entity level and all earnings flow to the shareholders for taxation.If you are interested in forming or changing an entity, please call Gary Bloome PA and we can lead you through the process.

After the Domestic Production Activities Deduction (DPAD) was fully phased-in in 2010, taxpayers could take a deduction of 9% of the lesser of their qualified production activities income or taxable income. This deduction is an adjustment to income on the front page of the 1040, but in my experience, I seldom see the deduction being taken.

Why? It may be due to the complexity of the calculation, tax preparer unawareness or misunderstanding of what constitutes domestic production. Complexity

The calculation requires the isolation of qualified production activities income. The first step is to identify the gross receipts for the domestic production. Total receipts may include both domestic gross receipts and non-domestic gross receipts, and the tax regulations require the allocation method to be reasonable. The regulations offer guidelines to determine whether or not the allocation method is reasonable.Transformation is a requirement of production. The four specific operations that represent transformation are: Manufactured, Produced, Grown or Extracted. Without one of these elements, production has not occurred.

Qualified production property includes tangible personal property, computer software and certain sound recordings. Tangible personal property includes all tangible personal property other than land or real property, and includes gas, chemicals and similar property.

Another element that is required in order to qualify as domestic production is “in whole or significant part” criteria. As a general guideline, if 20% or more of the cost of goods sold is made up of direct labor and allocated overhead for domestic production, the activity would meet the criteria.Once all elements are identified, Form 8903 is used to quantify the credit. Besides the income limitation, the credit is also limited to 50% of W2 income reported by the entity that was allocable to domestic production gross receipts.Tax Preparer AwarenessAlthough the DPAD is a separate line item in the “adjustments to income” section of the tax return, tax preparers who are unaware of the credit may overlook it. Knowledgeable CPAs, enrolled agents and other preparers will increase their value to their clients by taking this and all available credits on their clients’ tax returns. Many times these credits flow to the 1040s from pass through entities on K1s from partnerships, S-Corps and similar entities.Domestic Production

What constitutes Domestic Production for purposes of the credit? Besides what is normally considered manufacturing, several other activities also qualify. For instance, many construction activities qualify as domestic production activities. The production of electric, natural gas and drinkable water in the United States is also domestic production for the purpose of determining the credit.In conclusion, the DPAD can significantly impact an individual’s taxes. Tax preparers may better serve their clients by being aware of this complex topic.